5 Things Potential Franchisees Need to Prove
There are specific qualities that franchisors look for when they review the applications of potential franchisees. Franchisors more than likely will not invest in someone who may be considered to be high risk. Instead they favor applicants who exhibit characteristics that suggest an ability to manage a business and adapt to their environment to ensure profitability.
If you don't have an entrepreneurial background, do not fear, as most franchisors are well aware that applicants may not have direct experience in running their own business.
The following are five areas that potential franchisees should be prepared to address to land their franchise of choice:
1. Financial Situation – This is important in determining the applicant’s stability and ability to have a cushion if the business hits a rough patch. Franchisors will consider their applicant’s net worth and any additional sources of income. The net worth will include assets, such as cash, real estate, savings, stocks, bonds, and so on. Franchisors are also concerned with potential liabilities. For example, does the applicant have any outstanding student loans or other debts that could pose a problem?
2. Educational History – Franchisors are interested in the educational background of their applicants. Although a college degree may not be critical to running a franchise, applicants who have invested in their educational development may be viewed as more disciplined and reliable.
3. Previous Employment – Franchisors are always interested in their applicants’ experience and its applicability to franchising. Expect to send in a resume as well as professional and/or personal references.
4. Motivation for Buying – Franchisors want their applicants to show enthusiasm. Hopefuls are expected to sell themselves, to prove why they are a great fit for the franchise's business model. Applicants must make sure to highlight aspects of their personal and professional history that illustrate their strong candidacy. This is why it is important for applicants to do their own research up front to determine the type of franchise they would be best suited to operate.
If a prospective franchisee can effectively filter down the thousands of available franchise opportunities to just those few that best match his or her financial situation, skills, experience, and personality, the candidate's enthusiasm for those perfectly matched franchise opportunities can help convince otherwise skeptical franchise development directors that the candidate could be the franchise system's next great franchisee.
5. Demonstrate a clear understanding of responsibilities - Franchisors are looking for candidates who have realistic expectations and are aware of the requirements and intricacies of working under a given franchise brand. Again, this is why we at FranchiseHelp advise prospective franchisees to conduct their research first and submit their applications second.
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How Do You Pay for a Franchise?
Whether you’re purchasing a whopper from Burger King or joining the Burger King franchise system, the old mantra holds true: there’s no such thing as a free lunch. When you first get started running a franchise you need to pay a fee to allow you to enter into that franchise. These fees are the largest fees that you will normally pay a franchisor and typically range between $5,000 and $1,000,000 depending on the franchise. The franchisor charges this fee as a way to recoup the costs of expanding the franchise and to continue to grow. From a franchisee perspective, this is a major outlay and can take a long time to make back, but is a necessary step. Aspiring business owners must understand how much capital is available to them so they can ascertain how much they can afford. The cash you have at your disposal is known as liquidity, and there are numerous ways to increase your liquidity above the balance in your bank account. As a result, many people don’t realize how much capital they actually can use for investments, like launching a franchise branch. We’ll run through some of those methods below.
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